8-K: SAIC Reports Mixed Q1 FY26 Results with Revenue Growth and Strong Bookings, Reaffirms Full-Year Guidance

Science Applications International Corporation (SAIC) announced its first fiscal quarter 2026 results, reporting 2% revenue growth and a strong 1.3 book-to-bill ratio, while reaffirming its full-year fiscal 2026 guidance despite a decline in net income and negative free cash flow.

Summary

• Revenues for the first fiscal quarter ended May 2, 2025, increased by 2% to $1.88 billion compared to the same period in the prior year.
• Net bookings for the quarter were approximately $2.4 billion, resulting in a book-to-bill ratio of 1.3 for the quarter and 0.8 for the trailing twelve months.
• Net income decreased by 12% to $68 million, and diluted earnings per share (EPS) decreased by 4% to $1.42.
• Adjusted EBITDA was $157 million, or 8.4% of revenues, a 5% decrease from the prior year, with adjusted EBITDA as a percentage of revenues decreasing by 60 basis points.
• Adjusted diluted EPS remained flat at $1.92 compared to the prior year quarter.
• Cash flows provided by operating activities increased by 2% to $100 million, but free cash flow was negative $(44) million, a significant decline from $13 million in the prior year quarter.
• SAIC deployed $152 million of capital during the quarter, primarily through $125 million in share repurchases and $19 million in cash dividends.
• The estimated total backlog at the end of the quarter was approximately $22.3 billion, with $3.3 billion being funded backlog.
• Management reaffirmed its fiscal year 2026 guidance, projecting revenues between $7.60 billion and $7.75 billion, Adjusted EBITDA between $715 million and $735 million (9.4% 9.6% margin), Adjusted Diluted EPS between $9.10 and $9.30, and Free Cash Flow between $510 million and $530 million.
• Notable contract awards included a five-year, $1.8 billion contract for the U.S. Army Combat Capabilities Development Command (CCDC) Aviation and Missile Center (AvMC), a $327 million contract renewal for the Pension Benefit Guaranty Corporation, and approximately $300 million in awards from the U.S. Space and Intelligence Community.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While net income and free cash flow declined, revenue grew, and the company secured significant new contracts, leading to a strong quarterly book-to-bill ratio. Management reaffirmed full-year guidance, indicating confidence despite a 'dynamic operating environment.' The negative free cash flow is a concern, but the overall picture suggests stability and continued business capture.

Positives

• Revenues increased by 2% to $1.88 billion, driven by ramp-up in volume on existing and new contracts.
• Strong net bookings of $2.4 billion resulted in a robust quarterly book-to-bill ratio of 1.3, indicating significant new business capture.
• Secured major contract awards, including a $1.8 billion contract with the U.S. Army CCDC-AvMC and a $327 million renewal with the Pension Benefit Guaranty Corporation.
• Cash flows provided by operating activities increased by $2 million to $100 million, primarily due to higher cash from the MARPA Facility and lower incentive-based compensation payments.
• Management reaffirmed its fiscal year 2026 guidance, signaling confidence in achieving full-year financial targets.
• Weighted-average diluted shares outstanding decreased to 47.8 million from 52.1 million, reflecting effective share repurchases.
• The Civilian segment demonstrated strong performance with an 8% revenue increase and an improved operating margin.

Negatives

• Net income decreased by 12% to $68 million compared to the prior year quarter.
• Operating income declined by 8% to $121 million, with operating income as a percentage of revenues decreasing by 70 basis points to 6.4%.
• Adjusted EBITDA decreased by 5% to $157 million, and the adjusted EBITDA margin declined by 60 basis points to 8.4%.
• Diluted earnings per share decreased by 4% to $1.42.
• Free cash flow was negative $(44) million, a substantial decrease from $13 million in the prior year, primarily due to cash used from the Master Accounts Receivable Purchase Agreement (MARPA Facility).
• The trailing twelve months book-to-bill ratio was 0.8, indicating that over a longer period, new business awards are not fully replacing revenue recognized.
• The Defense and Intelligence segment experienced a slight revenue decrease of 0.2% and a decline in operating margin.
• Corporate operating and adjusted operating losses increased due to higher selling, general, and administrative expenses.

Risks

• Forward-looking statements involve risks, uncertainties, and assumptions, and actual results may differ materially from guidance due to various factors.
• Detailed risks, uncertainties, and assumptions are discussed in the Risk Factors, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Legal Proceedings sections of the company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and other SEC filings.

Future Outlook

Management reaffirmed its fiscal year 2026 guidance, projecting revenues between $7.60 billion and $7.75 billion, Adjusted EBITDA between $715 million and $735 million (9.4% 9.6% margin), Adjusted Diluted EPS between $9.10 and $9.30, and Free Cash Flow between $510 million and $530 million. The company anticipates continued opportunities driven by the rapid evolution of new technologies, a focus on deploying software for efficiency, and an elevated global threat environment.

Management Comments

• "Our performance in the first quarter reflects the steady progress we are making against our enterprise growth strategy despite a still dynamic operating environment." Toni Townes-Whitley, SAIC Chief Executive Officer.
• "As a premier mission integrator, the rapid evolution of new technologies, a renewed focus on deploying software to drive efficiency, and an elevated global threat environment create significant opportunities for SAIC." Toni Townes-Whitley, SAIC Chief Executive Officer.
• "I am confident that SAIC is prepared and well aligned with these macro trends to drive value for our customers, employees, and shareholders." Toni Townes-Whitley, SAIC Chief Executive Officer.

Industry Context

SAIC operates within the U.S. government contracting sector, specializing in technology integration for defense, space, civilian, and intelligence markets. The company's focus on digital transformation, software deployment, and addressing an elevated global threat environment aligns with broader industry trends emphasizing modernization, cybersecurity, and advanced technology solutions for national security and public sector operations. The strong book-to-bill ratio for the quarter suggests continued demand for its services in a competitive landscape, although the trailing twelve months ratio indicates a more challenging environment over a longer period.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or results to assess SAIC's performance against global benchmarks.
• The company's focus on digital transformation, mission IT, and enterprise IT aligns with general trends in the government contracting sector where agencies are increasingly investing in modernizing their IT infrastructure and leveraging advanced technologies like cloud services and AI.
• The book-to-bill ratio of 1.3 for the quarter is generally considered healthy for a government contractor, indicating strong new business capture, though the trailing twelve months ratio of 0.8 suggests a more challenging environment over a longer period.

Stakeholder Impact

• Shareholders: Impacted by the quarterly cash dividend of $0.37 per share and the ongoing share repurchase program ($125 million in Q1), which can enhance shareholder value. The decline in net income and diluted EPS might be a short-term concern, but reaffirmed guidance suggests stability.
• Customers (U.S. Government agencies): Benefit from continued IT services and technology integration, as evidenced by significant new and recompete contract awards from the U.S. Army, Pension Benefit Guaranty Corporation, U.S. Space and Intelligence Community, and Department of State.
• Employees: The company's continued contract wins and reaffirmed guidance suggest stable employment prospects. The CEO's comments about driving value for employees indicate a focus on workforce well-being.

Next Steps

• SAIC management will discuss operations and financial results in an earnings conference call on June 2, 2025, at 10:00 a.m. Eastern time.
• The Company's Board of Directors declared a cash dividend of $0.37 per share payable on July 25, 2025, to stockholders of record on July 11, 2025. SAIC intends to continue paying dividends quarterly.

Key Dates

Recommendation

Keywords

SAIC, Science Applications International Corporation, Q1 2026 Earnings, Financial Results, Government Contractor, Defense Technology, IT Services, Digital Transformation, SEC Filing, 8-K, Book-to-bill, Adjusted EBITDA, Free Cash Flow, Backlog, Government Contracts, Federal IT, Space, Intelligence Community, Cloud Services